Lufthansa officials said the overflight dispute has political overtones (AFP)
November 16, 2007 (RFE/RL) -- Russian and European delegations were scheduled to gather today for a two-day civil aviation summit in Moscow.

Russian authorities, however, were forced to cancel the summit after European delegates boycotted the event amid a bitter dispute on overflight rights.

Lufthansa, the German state-owned airline, has been battling what it says are illegal fees charged by Russia to use an air corridor when flying cargo jets to China and other Asian countries. And Russia has also been pushing for the airline to move its regional cargo hub from Astana, in Kazakhstan, to Siberia.

While Russian officials call the issue purely economic, many in Germany say the dispute has strong political undertones -- another sign of the cooling ties between Russia and the EU.

The dispute culminated on October 28, when Russia briefly barred Lufthansa Cargo from its airspace, claiming a temporary bilateral agreement had elapsed. Authorities nonetheless extended the carrier's overflight rights until the end of February.

But Lufthansa cried foul.

"It's a complicated issue, and it's a political issue," Lufthansa spokesman Michael Goentgens told RFE/RL. "We are just the company that suffers from these conflicts. We're hoping for long-term solutions that are fair to both parties and enable us to fly over Russia since this is the shortest way. It's better both economically and ecologically, because bypassing Russia costs thousands of liters of kerosene every week."

This view was widely echoed in the German press, which denounced Russia's temporary overflight ban as an aggressive attempt to squeeze higher fees out of European carriers. The European Union says its airlines spend a total of 300 million euros ($439 million) a year on Russian overflight rights.

An Economic Conflict

Many see the dispute as the latest in a series of economic battles between Russia and the European Union. Until now, countries on the edge of Europe bore the brunt of these disputes -- whether the battle had been about energy supplies and distribution networks or agriculture. Russia now appears to be taking on the largest economies of the 27-member bloc.

"Now it's key EU member states that are being targeted, like Germany, that always claimed to have a particularly good relationship with Russia," says Joerg Himmelreich, a Berlin-based analyst for the German Marshall Fund of the United States. "And I think this in general demonstrates and proves the change in Russian foreign policy toward the European Union and the change in Russia's foreign policy in general."

But what is perceived in Europe as a political issue is seen in Russia as an isolated economic squabble.

Aviation officials and analysts in Russia largely reject European claims that current overflight arrangements are outdated and that the fees charged by Russia are illegal. The Chicago Convention on International Civil Aviation, signed in 1944 and still active today, stipulate that signatories -- which include Russia -- are not entitled to charge foreign airlines fees other than the cost of local air-control services.

"But these international agreements ensure the principle of parity," explains Aleksei Komarov, an independent Russian aviation expert. "The airlines nominated by the two governments are required to transport the same number of passengers between these two countries, and to conduct the same number of flights to the same number of cities. Considering that Aeroflot and Transaero don't use the totality of their rights, they allow foreign airlines to use Russian air space in exchange for a compensation fee. Whether this is fair or not is debatable."

Moscow also denies having committed itself to entirely scrapping the fees as part of its reforms aimed at gaining membership in the World Trade Organization. Russian aviation officials say they only agreed to restructure the fee system.

Lufthansa In Siberia?

A number of German observers say another motive lurks behind Russia's brief overflight ban -- the prospect of a major Lufthansa cargo hub in Siberia. There has been talk of the German carrier moving its regional cargo transit hub from the Kazakh capital of Astana to Siberia. But here too, the issue is drawing widely divergent accounts from both sides.

"There is no problem, it's already been settled," Timur Khikmatov, the spokesman for Russia's Transport Ministry, told RFE/RL. "On November 14, we received a letter from [German civil aviation chief] Thilo Schmidt, in which he confirmed the readiness to conduct flights to Krasnoyarsk, given that this airport will be upgraded to Category 2. We said 'thank God, finally we received a letter from our German colleagues.'"

According to Khikmatov, Russian and German authorities in February signed an agreement under which Lufthansa Cargo pledged to move its regional hub to either the Krasnoyarsk or the Novosibirsk airport. He insists that Germany failed to give its final answer by the agreed June 25 deadline and ignored four subsequent letters of complaint from the Russian Transport Ministry. This was what prompted Russia to "warn" Germany over overflight rights in October, says Khikmatov, who also denounces a "propaganda campaign" against Russia in German media.

Lufthansa spokesman Goentgens, however, tells a somewhat different story. "There has been no agreement. We talked about this issue, and we know that Russia is interested in us moving this hub to Siberia. We analyzed this and came to the conclusion that moving the hub is currently not possible in the short term. However, we are still open to talks and, in general, there might be a willingness to consider moving our hub to Krasnoyarsk. But a couple of conditions have to be fulfilled."

A central condition is the upgrade of Krasnoyarsk airport's landing system, which currently does not enable aircraft to land in bad weather conditions.

The transport ministries of Germany and Russia are currently in negotiations to hammer out a deal, both on overflight fees and a possible Lufhansa hub in Krasnoyarsk.

Should they succeed in finding common language, both sides have much to gain from these talks. "Russia wants to create a powerful cargo transport center in Siberia," says Vadim Bazykin, a prominent Russian test pilot. "That's why it's buying up Boeing cargo planes, to set up a base there. The funds handed over by airports make up the lion's share of national budgets, it's very profitable."

As for Germany, Lufthansa's Goentgens says Siberia offers a more advantageous hub location than Kazakhstan for European cargo jets en route to the lucrative Asian markets.